Wednesday, September 28, 2011

Samsung takes Android patent license from Microsoft rather than wait for Motorola

Microsoft just announced a patent license agreement with Samsung, under which "Microsoft will receive royalties for Samsung’s mobile phones and tablets running Android". This is the most important Android-related intellectual property deal in its own right, and even more significant against the background of Google's proposed acquisition of Motorola Mobility. If Samsung truly believed that Google's acquisition of Motorola Mobility was going to be helpful to the Android ecosystem at large, it would have waited until that deal is closed before concluding the license agreement with Microsoft. But Samsung probably knows it can't rely on Google. It decided to address Android's intellectual property issues on its own.

The substance and the timing of this announcement call into question the extent to which Google and its major hardware partners are committed to each other (apart from everyone's lip service).

By taking a royalty-bearing license, Samsung recognizes that Android has intellectual property problems that must be resolved with license fees, and reduces to absurdity the idea that Google is going to be able to protect Android after the acquisition of Motorola Mobility. Since Google announced the merger agreement with Motorola Mobility, Microsoft has signed up three more Android OEMs as patent licensees, including the number one in the market.

Samsung owns approximately 28,000 patents just in the United States. That's far more than the combined number of granted patents and pending patent applications held by Motorola on a worldwide basis (approximately 24,500). Around the globe, Samsung holds more than 100,000 patents.

Samsung clearly hedges its platform bets: Earlier today I read about Samsung's co-leadership (together with Intel) of a new mobile Linux initiative named Tizen. Samsung recently also announced plans to invest into its own Bada platform. Today's announcement indicates that Samsung's partnership with Microsoft will continue and possibly be expanded. This is a rapidly-evolving field, and the prospect of Google becoming a device maker is anything but reassuring for an OEM like Samsung. Those OEMs have to take care of themselves now, even if it's embarrassing for Google in some cases.

By now, including an earlier Microsoft agreement with HTC (announced in April 2010), the top two Android device makers -- together accounting for than 50% of the U.S. Android business according to a Microsoft statement -- have taken such a license. "That leaves Motorola Mobility, with which Microsoft is currently in litigation, as the only major Android smartphone manufacturer in the U.S. without a license", Microsoft wrote...

A settlement of Microsoft's litigation with Motorola Mobility will just be a matter of time. Interestingly, a recent SEC filing by Motorola Mobility suggested that the company was seriously considering such a settlement (though the filing didn't name Microsoft specifically).

In between the agreements with HTC and Samsung, Microsoft also closed license deals with six smaller Android device makers (smaller in terms of market share). Between June 27 and July 5, 2011, Microsoft signed up four more licensees (General Dynamics Itronix, Velocity Micro, Onkyo, and Wistron). About three weeks ago, on September 8, Microsoft announced two more license agreements (Acer and ViewSonic).

In my opinion, Samsung currently builds the best mobile devices. I bought a Galaxy S i9000 last year, and this spring switched to its successor, the S II. And I'm now awaiting the Galaxy Note with great interest. I'll take a look once it's released in Germany. (Unlike the Galaxy Tab 10.1 and the 7.7 version, the Galaxy Note is going to become available here.)

Microsoft's statement also says that "a solution [to the smartphone patent wars] is increasingly in sight". HTC and Samsung are defending themselves in court against Apple but were able to work out license deals with Microsoft without a need for litigation. Observers have agreed all along that disputes between major technology companies always result in settlements and license agreements. That is true. However, it doesn't mean that the outcome of all of this has no further effect. This isn't just much ado about nothing. It's serious business.

The terms on which companies ultimately settle can vary greatly. The reason why some of these matters go to court in the first place is that positions are often far apart. Just look at how difficult it proves to be for Oracle and Google to negotiate a settlement at this stage (though I'm sure that at some point they, too, will agree on something).

I guess it will still take some time to sort out everything between the large players in this industry, but at some point new litigation will probably just be brought by non-practicing entities.

Most patent license agreements aren't announced at all, and those that are announced remain confidential for the most part. Today's announcement doesn't specify the terms other than making it clear that Samsung pays for each Android-based device.

A couple of months ago, reports came out of Korea that Microsoft and Samsung were negotiating, and those reports suggested that Microsoft asked for $15 per device and Samsung was trying to move the amount closer to $10. None of this is verifiable, of course. The amount could be above that range, or below, or whatever.

Today's announcement is relevant to the situation between Apple and Samsung in the sense that it shows Samsung recognizes Android's patent problems and is willing to conclude license agreements to address them.

However, a cross-license between Microsoft and Samsung does not mean that Samsung can use any Microsoft patents against Apple. It just means that Samsung is allowed to practice the inventions protected by Microsoft's patents to the extent allowed by the agreement.

As far as Samsung builds devices running Windows Phone, it will also benefit from Microsoft's patents: Apple brings infringement lawsuits only against Android devices, not against Windows Phone products (at least so far). In its lawsuits with HTC and Samsung, Apple consistently accused exclusively Android-based devices.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

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About Me

Florian Mueller is a former award-winning intellectual property activist with 25 years of software industry expertise spanning across different market segments (games, education, productivity and infrastructure software), diverse business models and a variety of technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof.) He is now developing a game app for smartphones and tablet computers.